Citing the inadequacy of plan expenditure to develop states, Planning Commission Deputy Chairman Montek Singh Ahluwalia on Thursday said there was a need for attracting private investments for socio-economic growth of states.
"Plan expenditure of a state does not necessarily determine its growth rate. It depends on the state's capacity to attract investments from within the state, outside and abroad," he said while delivering an address on "Problems of the Backward States in the Post Reform Period" at a seminar organised by the Centre for Political Studies of Jawaharlal Nehru University.
Both central and governments of these states should collectively work towards bridging the critical gaps in infrastructure on priority to create investor friendly environment, he added.
Data available with the Planning Commission showed that the proportion of plan expenditure in state development product had hardly any role to play in growth.
In 2002-03, both Bihar and Gujarat had plan expenditure at 3.9 per cent of SDP, Orissa had a share of 5.5 per cent, while Maharashtra had only 2.3 per cent.
Sustainable growth could not be reached only through public expenditure and private investment had a major role to play in the liberalised economy.
In the pre-liberalization era, the focus was on reducing disparities through the license raj, which failed to reach the desired goals.
States needed a radical re-examination of the constraints which blocked inflow of investments and would have to devote a minimum of 5-10 years to tackle the problem.
Efforts were on to improve road connectivity and significant improvement was likely in four to five years time.
There was a need for more political awareness to connect hinterland states with coastal areas and backward states should expeditiously bring about reforms in the power sector to encourage both domestic and international investors.
Ahluwalia said that the past experience (during the green revolution) had proved beyond doubt that maintainability of infrastructure had to be given more attention.
The infrastructure being built should at least be self-sustaining and states would have to take adequate measure in this regard, he said.